Executive Summary / Key Takeaways

• Strategic Resilience and Diversification: Jerash Holdings is transforming from a traditional apparel manufacturer into a resilient, diversified player, leveraging Jordan's unique trade advantages and sustainable innovation to capture market share amidst global supply chain shifts and geopolitical volatility.
• Leveraging Geopolitical Shifts: The company is uniquely positioned to benefit from the global trend of supply chain diversification away from Asia, offering competitive labor costs and preferential trade agreements with the U.S. (though recently impacted by new tariffs) and the EU.
• Sustainable Innovation as a Moat: The Newtech Textile joint venture, with its proprietary Cooltrans technology, represents a significant technological differentiator, promising substantial reductions in water, energy, and carbon footprint, attracting ESG-focused global brands.
• Capacity Expansion and Customer Growth: Jerash is actively expanding its production capacity by 15-25% through mid-to-late 2025 and has secured major new orders, including a significant initial order through a new collaboration with Hansoll Textile, indicating strong future revenue potential.
• Financial Rebound and Outlook: Despite recent challenges from geopolitical disruptions and product mix shifts, Jerash reported a 24% revenue increase in FY2025 and projects a robust 50-53% revenue growth for Q4 FY2025, signaling a strong operational recovery and positive trajectory.

The Shifting Sands of Global Apparel Manufacturing

Jerash Holdings (NASDAQ:JRSH) operates at the nexus of global apparel manufacturing, specializing in customized sportswear and outerwear from its facilities in the Hashemite Kingdom of Jordan. The company serves a roster of well-known global brands and retailers, including VF Corporation (VFC) (The North Face, Timberland, Vans), New Balance, G-III (GIII), Hugo Boss (BOSSY), American Eagle (AEO), and Skechers (SKX). Its strategic location in Jordan has historically provided a significant competitive edge, benefiting from duty-free access to the U.S. market under the United States-Jordan Free Trade Agreement (effective 2010) and to EU countries via the Association Agreement (effective 2002).

The broader apparel industry is undergoing a profound transformation. Rising labor costs in traditional manufacturing hubs like China (where machine operators can earn over $1,000/month) and Vietnam (~$500/month) are compelling brands to diversify their supply chains. Jordan, with its migrant workforce earning a basic salary of around $300/month (including accommodation and food provided by Jerash), offers a compelling cost advantage. This, combined with the aforementioned trade agreements, has made Jordan an increasingly attractive alternative, particularly for higher-value products where duty savings can be substantial—for instance, a buyer can save $15 on a $50 jacket due to a 33% duty saving when moving production from China or Indonesia to Jordan.

Jerash's history, rooted in the establishment of Jerash Garments in Jordan in 2000, has been one of steady capacity building and strategic adaptation. Its public listing on Nasdaq in 2018 marked a new phase of growth, characterized by acquisitions like Paramount and MK Garments, and the development of new facilities such as the Al-Hasa factory. This foundational strength has allowed Jerash to weather recent industry headwinds, including inflationary pressures and a consumer shift towards lower-margin products, by strategically maintaining its workforce even if it meant taking on lower-margin, high-volume orders. This contrasts sharply with competitors like Classic Apparel, which reportedly laid off 9,000 workers due to reduced orders, highlighting Jerash's commitment to preserving its long-term operational capabilities.

Technological Edge: Sustainability as a Strategic Imperative

A critical differentiator for Jerash Holdings is its proactive embrace of sustainable manufacturing through the Jerash Newtech joint venture, formed in November 2023 with Newtech Textile HK Limited. This strategic partnership is set to establish a state-of-the-art fabric facility in Jordan, leveraging proprietary Cooltrans technology for textile dyeing. This technology offers remarkable quantifiable benefits over traditional dyeing processes: an expected reduction in water usage by approximately 80-90%, energy consumption by about 65%, and carbon footprint by over 50%.

For investors, this technological leap is a significant competitive moat. It positions Jerash as a leader in ESG (Environmental, Social, and Governance) textile manufacturing, aligning with the growing demand from global brands for sustainable supply chains. This innovation not only shortens fabric sourcing lead times and reduces dependency on Asian suppliers but also enhances Jerash's overall gross margin and EBITDA for the consolidated company. The first production from this facility is tentatively expected by June 2024 (Q1 Fiscal 2025), with a total project cost estimated between $25 million and $30 million, of which Jerash holds a 51% equity interest. The project has garnered interest from financial institutions, including the World Bank, and governments, underscoring its strategic importance and potential for external funding.

Financial Performance and Operational Resilience

Jerash Holdings demonstrated significant operational resilience in fiscal year 2025, despite a challenging global environment. Revenue for the fiscal year ended March 31, 2025, increased by 24% to $145.81 million, up from $117.19 million in fiscal 2024. This growth was primarily driven by increased shipments to major U.S. customers. Gross profit saw an even more substantial increase of 32% to $22.32 million, with the gross margin improving to 15% from 14% in the prior year. This margin expansion was largely attributable to higher production and shipment volumes, which generated economies of scale and better planning.

However, the period was not without its hurdles. Geopolitical turmoil in the Middle East, particularly congestion at Israel's Haifa Port and Red Sea attacks, caused significant logistics disruptions. In Q3 Fiscal 2025 alone, an estimated $6 million of finished goods were delayed and not shipped until early Q4, incurring over $100,000 in port storage fees. These disruptions also led to higher logistics and labor costs, contributing to a net loss of $0.8 million in fiscal 2025, though this was an improvement from the $2.0 million net loss in fiscal 2024. Selling, general, and administrative (SG&A) expenses increased by 19% to $20.9 million, partly due to higher shipment costs and air freight to mitigate delays.

Jerash maintains a solid liquidity position. As of March 31, 2025, the company held $13.3 million in cash and $1.7 million in restricted cash, with a current ratio of approximately 2.70 to 1.00 and net working capital of $34.6 million. The company has leveraged supply chain financing programs with major customers to expedite receivable collections and drew $4.5 million in short-term bank financing to support raw material purchases for fiscal 2026 orders. Management believes current cash and operational cash flow will suffice for working capital needs over the next 12 months.

Strategic Outlook and Growth Catalysts

The outlook for Jerash Holdings is increasingly optimistic, underpinned by strategic initiatives and a favorable shift in industry dynamics. Management projects a robust revenue increase of 50% to 53% for Q4 Fiscal 2025 compared to the prior year quarter, which includes the $6 million in delayed shipments from Q3. Revenue for Q1 Fiscal 2026 is expected to be in line with the record Q1 Fiscal 2025. The gross margin goal for Q4 Fiscal 2025 and Fiscal 2026 is approximately 15% to 16%, reflecting ongoing efforts to optimize costs and product mix.

A key growth catalyst is the continued diversification of its customer base. While VF Corporation remains a dominant customer (64.6% of FY2025 sales), Jerash is seeing significant growth with Timberland, initiating trial orders for Vans, and expanding business with a new European-based high-end apparel brand and G-III. The Busana Apparel Group joint venture, formed to further customer diversification, is projected to bring in $8 million to $9 million in new orders over the next 12 months, starting from Q4 Fiscal 2024. Although initial growth from this venture has been "relatively flat" due to regional turmoils, management anticipates a high conversion rate from test orders to full production.

To support this anticipated growth, Jerash is aggressively expanding its production capacity. Plans include a 15% increase in processing capacity by June 2025 through expansions of existing facilities. Additionally, the Al-Hasa facility is slated for expansion, aiming for an additional 5% to 10% production capacity by the end of calendar year 2025. Longer-term, the company is assessing larger-scale expansion plans on its owned land, potentially requiring additional capital, for which it is open to debt and equity financing. The recent major initial order secured for a large U.S. multinational retailer through a new strategic collaboration with Hansoll Textile further validates Jerash's ability to attract significant new business.

Risks and Mitigating Factors

Despite the positive outlook, Jerash Holdings faces several pertinent risks. Customer concentration remains a significant factor, with VF Corporation accounting for a substantial portion of sales and no long-term contracts in place. Geopolitical instability in the Middle East, including the Israel-Hamas conflict and Red Sea attacks, continues to pose a threat to logistics and operational costs, though the company has implemented contingency plans, including using alternative ports.

Furthermore, the U.S. imposed a 10% baseline tariff on imports from Jordan starting April 5, 2025, with a 20% reciprocal tariff announced (though postponed for 90 days). This shift from a previously duty-free environment could impact Jerash's competitive pricing, although its lower labor costs and EU trade agreements still provide advantages. Internally, the company has identified material weaknesses in its internal control over financial reporting related to IT general controls, which it is actively working to remediate. Inflationary pressures and shifts in consumer spending towards lower-margin products also continue to influence profitability.

Jerash mitigates these risks through strategic diversification, disciplined cost control, and maintaining a loyal, skilled workforce. Its ability to pivot to higher-volume, lower-margin orders during downturns, rather than resorting to layoffs, preserves its operational readiness for when higher-margin business returns. The focus on sustainable technology also provides a long-term competitive advantage that can attract new, resilient customer segments.

Conclusion

Jerash Holdings stands at a pivotal juncture, strategically positioned to capitalize on the evolving global apparel manufacturing landscape. Its deep roots in Jordan provide a unique cost and trade advantage, which it is actively leveraging to attract new customers seeking supply chain diversification away from traditional Asian hubs. The company's bold move into sustainable textile innovation through the Newtech Textile joint venture represents a significant technological moat, aligning its future with the growing demand for ESG-compliant manufacturing.

While geopolitical tensions and recent tariff changes present headwinds, Jerash's disciplined operational management, proactive capacity expansion, and successful customer diversification efforts are setting the stage for a compelling growth trajectory. The projected revenue increases for fiscal 2025 and 2026, coupled with a consistent dividend payout, underscore the company's resilience and potential. For discerning investors, Jerash Holdings offers a unique opportunity to invest in a company that is not merely reacting to market forces but actively shaping its future through strategic foresight and a commitment to sustainable, high-quality production.